This is how Varroc Group aims to double its revenue to Rs 20,000 cr by FY'21

To power such an ambitious growth, the company is looking at both organic and inorganic expansion along with establishing its footprint in new geographies. The component maker, which claims a 20% CAGR in the past 10 years, is going public early next fiscal.Nabeel A Khan | ETAuto | Updated: April 05, 2018, 11:49 IST

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India’s one of the fastest growing auto component manufacturers Varroc Group is aiming to double its revenue in next three years (FY20-21) to Rs 20,000 crore by way of organic and inorganic growth.

The company had revenue of $1.5 billion in FY17 and is expecting a 10 per cent increase in FY18, which will be concluding on 31 March 2018.

Tarang Jain, managing director, Varroc Group, said “Organically, the investments are gonna be in a tune of about Rs 850 crore annually… We have done a planning for next three years and have few ideas about growth both organically and inorganically. We have worked out revenue growth plans too.”

The company is eyeing to make some big acquisition to touch its high revenue goal. It is also planning to expand its footprints in new geographies too. The component maker is also opening a new office in Poland for engineering of exterior lighting business.

“We are financially stable company and looking out for acquisition too, without that it will difficult to achieve the target that we have laid out for ourselves. Currently, our debt to equity ratio are at a low level, our policy has been that we will never exceed 1:1 debt to equity ratio and today our debt are far lower than 1,” he said.

According to the industry sources, the Varroc Group is also planning to launch an initial public offering (IPO) in the first quarter of the next fiscal.

Varroc Group turned around Visteon lighting business from low EBIDTA of 3% to over 10% now

The company has four successful acquisitions in its kitty, which includes the lighting business of US-based Visteon Corporation, Tri OM, for two-wheeler lighting, IMES Poland and Italy for forging business and a small Indian firm.

The Aurangabad (Maharashtra) headquartered company currently gets over 65 per cent of its businesses from overseas, while the rest comes from two-wheeler components.

The company now has two core businesses -- the bigger one is the global exterior lighting business and the other is two-wheeler component business in India.

“We are a growth-oriented company. In past 10 years, our CAGR has been 20 per cent. We have kept our basics right, our focus is always on the customers. The other most important aspect that helped us is the financial discipline,” commented Jain. And he expects this growth rate to continue further.

The group acquired Visteon’s exterior lighting business in 2012, which had EBIDTA of 3 per cent and now it has increased to over 10 per cent. The acquisition also fulfilled Jain’s long aspirations to be a global company.

Varroc Group is also planning to launch an initial public offering (IPO) in the first quarter of the next fiscal.

Before this acquisition, the Varroc Group was largely a two-wheeler company and mainly had a presence in India. The Visteon lighting business deal also helped it to get over $1 billion of revenue.

“When we acquired this business, it was a low EBIDTA company with global presence in Mexico, Czech Republic and China. The main reason for the EBIDTA was that the North American and Indian operations were in losses. And the challenge was here, how to turn it around. The sales revenue was also low. So, for the profit improvement, we had to grow the sales,” he said.

The other thing was operation, manufacturing systems and process were weak in Mexico and India, where the losses were occuring. So I think we worked on this, we strengthened our leadership team over the years in these plants, and worked on the manufacturing processes to improve the efficiency, which helped,” explains Jain on turnaround strategy.

Its plant in Mexico services the US and Canada, and the other plant in Czech facilities Europe, India and China.

Future Focus

The company is focusing to manufacture automotive electronics for electric vehicles in future. Thus, the major R&D work is going to be in this direction.

“…may be after 2-3 years, we would be on the electronics side where we would not be doing electronics only for our lighting components but it could more on electronics for passenger cars and EVs,” Jain said.

I should tell you that the number of R&D engineers will definitely exceed the number of employees we hire in other areas

Talking about the business case for electronics, Jain added: “New safety and emission norms are going to enhance electronics. The company has expedited its research and development work. We are hiring more and more software, hardware and electronic engineers… I cannot give you the exact number but I should tell you that the number of R&D engineers will definitely exceed the number of employees we hire in other areas,” he said. The company already has 850 engineers working globally.

The company had a humble beginning in 1990 with an investment of Rs 1 crore and started with a single plastic part for two-wheeler. Today, it has 37 manufacturing facilities, 12 engineering centres, 12,400 employees and 760 engineering experts in 12 countries.